Though you've been a careful planner for many years, you may not understand just how many ways retirement can affect your taxes. To help you make the right decisions regarding your retirement accounts and taxes, here are some important tips to remember.
If you assumed paying income taxes was a thing of the past once you retired, you may need to rethink this idea. Should you have income that is not tax-exempt, filing and paying taxes will still be part of your life each year.
Since any contributions you make to a Roth IRA are done so with after-tax dollars, this means any withdrawals you make from this account during your retirement are tax-free.
Once you retire, take full advantage of any and all tax credits that are available for you and your situation. For many retirees over age 65, the Credit for the Elderly or Disabled can be very helpful, especially if both you and your spouse are over age 65 and have a lower income.
If after retiring from your 9-5 job you decided to become self-employed, you can take advantage of some deductions regarding Medicare.
Paying Income Taxes
If you assumed paying income taxes was a thing of the past once you retired, you may need to rethink this idea. Should you have income that is not tax-exempt, filing and paying taxes will still be part of your life each year.
As of the tax year of 2020, if you filed jointly with your spouse who is also at least 65 years old and your income exceeded $27,400, this income could be taxed. Also, if you have income from a part-time job, you may meet the threshold necessary for you to pay taxes.
Maximize Benefits with Roth IRA
Since any contributions you make to a Roth IRA are done so with after-tax dollars, this means any withdrawals you make from this account during your retirement are tax-free.
By working with a tax preparation expert on this, you can enjoy a steady retirement income without paying income taxes. Be sure to find a professional since handling your taxes incorrectly could result in serious legal consequences.
Take Advantage of Tax Credits
Once you retire, take full advantage of any and all tax credits that are available for you and your situation. For many retirees over age 65, the Credit for the Elderly or Disabled can be very helpful, especially if both you and your spouse are over age 65 and have a lower income.
Self-Employment and Retirement
If after retiring from your 9-5 job you decided to become self-employed, you can take advantage of some deductions regarding Medicare.
In fact, you can deduct your Medicare Part B and Part D premiums, so long as you do not currently have access to healthcare through your spouse's employer.
Also, even if you do not itemize on your taxes, you are allowed to deduct your costs for Medicare Advantage or any supplemental Medicare coverage, which could save you thousands of dollars per year.
Since you spent so many years planning for your retirement, it makes sense to do the same regarding your taxes after you're retired. From maximizing your Roth IRA contributions to knowing which tax credits you can take, you'll soon have even more money to spend on the fun things in life.
Since you spent so many years planning for your retirement, it makes sense to do the same regarding your taxes after you're retired. From maximizing your Roth IRA contributions to knowing which tax credits you can take, you'll soon have even more money to spend on the fun things in life.
